The UAE Ministry of Finance has issued a revised administrative penalty framework under Cabinet Decision No. 129 of 2025, replacing Cabinet Decision No. 49 of 2021.
This update marks a significant shift from punitive penalties to a more compliance-driven approach, offering relief to taxpayers while maintaining discipline in VAT and Corporate Tax compliance.
What Has Changed? — Key Highlights
The new framework introduces major reductions in high-impact penalties, removes excessive caps, and provides clearer timelines for repeat violations.
Key Revisions
- Late payment penalty revised to 14% per annum
(Earlier: higher cumulative penalties with caps) - Voluntary Disclosure (VD) penalty reduced to
1% per month from the tax due date - Failure to submit VD before audit:
15% fixed penalty + 1% monthly - 75% reduction for failure to submit documents in Arabic
- 90% reduction for failure to notify legal representative
- TRN update penalties rationalised, with a 24-month repeat-violation window
These changes significantly reduce financial stress for businesses that proactively regularise their tax positions.
Penalties That Remain Unchanged
Certain core compliance penalties continue under the existing regime, including:
- Late filing of VAT returns
- Late VAT deregistration
- Import tax under-reporting
Businesses must continue to treat these areas with heightened compliance discipline.
Who Is Impacted?
These revisions apply to:
- VAT and Corporate Tax registrants
- Mainland and Free Zone entities
- Businesses with historical exposure, late filings, or pending voluntary disclosures
The changes present a strategic opportunity to reassess tax positions before enforcement actions.
What Should Businesses Do Now?
- Review past VAT and Corporate Tax filings
- Evaluate eligibility for Voluntary Disclosure under the reduced penalty regime
- Align internal compliance processes with the new timelines
- Act before audits or assessments are initiated
Early action can result in substantial penalty savings.
Need Expert Guidance on UAE Tax Compliance?
TextThe revised penalty framework offers meaningful relief — but only when applied correctly.
Our team at SKM International Chartered Accountants assists businesses across mainland and free zones with VAT, Corporate Tax, voluntary disclosures, and FTA compliance reviews.
📞 Call us: +971 55 278 9460
🌐 Visit: https://skminternational.org
💬 Free initial consultation available